Williams v Hensman [1861] 1 J & H 546

KEY POINTS

• A money fund was bequeathed for stock investment to provide an annuity to A, and the remaining principal was to go to her children upon her death.

• Eight children were involved, and they jointly authorized the trustee, three of whom were minors at the time. This authorization led to the fund being invested in the mortgage.

• This joint authorization effectively severed the interests of the five children from the three, although not from each other.

• The trustee provided one of the children with an estimated amount of their share, with the tenant for life covering the interest on this sum. Additionally, all the other children agreed not to demand reimbursement from the trustee in case the share fell short and pledged to indemnify the trustee against any claims, damages, or expenses related to the advance.

• One of the children survived the tenant for life and requested payment of her share. However, this payment was delayed because the trustee had commingled the fund with his funds on a mortgage and couldn't immediately convert it. Unfortunately, the child passed away before receiving payment.

• Whether this transaction would have been sufficient to sever her share is uncertain.

• When joint tenants conduct themselves in a way that treats their interests separately, it can sever the joint tenancy. This is true even if they were unaware that their interests were jointly held.

FACTS

• A money fund was left for investment to provide an annuity to A during her life, with the remaining principal intended for her children upon her death, constituting a joint tenancy.

• Eight children were involved, and during the tenant's lifetime for life (A), they collectively authorized the trustee to invest the fund in the mortgage, including three minor children. This collective authorization severed the interests of five children from the other three.

• The trustee gave one child an estimated share, with A covering the interest. Additionally, all other children collectively and individually agreed not to seek reimbursement from the trustee if the share fell short and committed to indemnify the trustee against claims, damages, or expenses arising from the advance, effectively severing all shares.

• One child survived A and requested her share, but payment was delayed due to the trustee mixing the fund with his funds on the mortgage, preventing immediate conversion. Sadly, the child passed away before receiving payment.

• The effectiveness of this transaction alone in severing her share remains uncertain.

• Notably, when joint tenants indicate separate interests, it can sever the joint tenancy, regardless of their initial awareness of their joint ownership.

JUDGEMENT

• The will established a joint tenancy, although this detail is not of significant consequence. What holds material weight is that the same affidavit proves that the parties involved treated their interests as a tenancy in common.

• This approach is justifiable because it is crucial to remember that a joint tenancy can be terminated at any joint tenant's discretion.

• Therefore, if all parties persist in conducting their affairs on the premise that their interests are not jointly held, it would be highly inequitable to suddenly assert a joint-tenancy status when all parties knowingly or unknowingly have consistently handled their interests as separate. Consequently, the continued existence of a joint tenancy cannot be reconciled with the covenant of indemnity referenced.

• Therefore, determine that all shares were severed.

COMMENTARY

• A fund was bequeathed to provide an annuity to A during her life, with the principal for her children upon her death, forming a joint tenancy. 

• Eight children authorized the fund's mortgage investment during the tenant for life's existence, severing five children's interests from three. 

• The trustee advanced one child's share; others pledged not to seek reimbursement and indemnified the trustee. 

• One child died before receiving payment, raising uncertainty about share severance. Joint tenants acting separately can sever the joint tenancy, regardless of initial awareness of joint interests.

ORIGINAL ANALYSIS

• A fund of money was bequeathed on trust to be invested so as to generate an income payable to A 'the principal to go to her children at her death'.

Held

• The will created a joint tenancy.

• The court set out three ways in which a joint tenancy may be severed. Joint tenancy may be severed (i.e. becomes a tenancy in common) by:

  1. Action of a joint tenant on his own share (where one party sells his share);

  2. Mutual agreement to sever their interests so that their shares become separate;

  3. Mutual conduct (Any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common.)

• NB The 1925 Act introduces notice in writing as a fourth type of severance